What Is Deed in Lieu of Foreclosure?

With a deed in lieu, instead of forcing the lender to foreclose, the homeowner hands over the deed voluntarily. In exchange, the lender typically releases the borrower from the mortgage obligation.

It's generally faster and less public than foreclosure, and it can be gentler on your credit. However, lenders usually only accept a deed in lieu when there are no other liens on the property and after the borrower has tried to sell.

A cash sale that pays off the loan is often a better outcome than a deed in lieu, because you may walk away with proceeds rather than simply surrendering the property. It's worth comparing both before deciding.